Beavis Construc tion Company was the low bidder on a construction project to bui
ID: 2558734 • Letter: B
Question
Beavis Construc tion Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2012 and completed in 2013. Cost and other data are presented below 2012 013 Costs incurred during the year S 450,000 S1.100,000 1050,000 Estimated costs to complete Billings during the year Cash collections during the ear Assu 00,000 400.000 00,000 500,000 me that Beavis uses the percent age-of-completion method for revenue recognition. Required: I Compute the amount of gross profit recognized dring 2012 and 20 2. Pre 3. Prepare pare all journal entries related to the construction project in 2012 and 2013. Statement of Financial Position end of 2012 and 2013(f any).Explanation / Answer
1.
2012
Contract Price $1,800,000
Actual cost to date $450,000
Estimated cost to complete $1,050,000 $1,500,000
Estimated gross profit $3,00,000
% of completion
(450,000/1,500,000) 30%
Gross Profit recognized $90,000
2013
Contract Price $1,800,000
Cost incurred
2012 $4,50,000
2013 $1,100,000 $1,550,000
Total gross Profit $2,50,000
Recognized in 2012 $90,000
Recognized in 2013 $1,60,000
2.
2012
A) Construction in progress A/c Dr 450,000
To Varions A/c 450,000
B)Account Recievable A/c Dr 400,000
To Billing on CC 400,000
C)Cash A/c Dr $300,000
To Account recievable $300,000
D)Construction in Progress $90,000
Cost of Construction $450,000
To Revenue from long term contarct $540,000
3.
Assets
Liabilities
Various credits $450,000
Account Receivable $100,000
Cash $300,000
Assets
Liabilities
Various credits $450,000
Account Receivable $100,000
Cash $300,000